SYDNEY - Police have stormed a cafe in central Sydney early Tuesday morning, ending the siege of a gunman who held more than a dozen hostages for more than 16 hours.

They fired automatic weapons and threw grenades moments after remaining captives were seen fleeing.

The dramatic end stage of the siege came as the gunman holding the remaining captives was revealed as a self-proclaimed Islamic cleric Man Haron Monis.

A Sydney Morning Herald reporter, who was near the scene, said: “Police and paramedics have stormed the building. Dozens of continuous bangs and possibly gun shots have lit up the sky.”

Multiple shots had been fired, reported the newspaper, adding that paramedics appeared to be entering the Lindt Cafe, accompanied by police.

An Iranian refugee on bail for accessory to murder had been holding dozens of hostages in a cafe in downtown Sydney, Australia media reported on Monday night.

Man Haron Monis, 49, also known as Sheikh Haron, first came to attention of police when he sent poisonous letters to the family of dead Australian soldiers. He was therefore sentenced to 300 hours of community service and placed on a two year good behaviour bond, according to The Sydney Morning Herald (SMH).

The Iranian refugee who came to Australia in 1996 was also a self-proclaimed "spiritual healer". He dealt with black magic at a premises in western Sydney more than a decade ago, the SMH reported.

Last year, the self-described cleric was charged with being an accessory before and after the fact to the murder of his ex-wife, Noleen Hayson Pal, who was allegedly stabbed and set alight in her apartment complex. In March, he was charged with sexually and indecently assaulting a young woman in 2002, according to The Australian.

Sources close to the incident urged caution in linking the attack to any terrorist group, such as Islamic State in Iraq and Syria (ISIS). It could be just an attack by an an unstable individual well known to police, they said.

Monis, living at Bexley North in Sydney's south, on his website likened himself to Wikileaks founder Julian Assange, and claimed the charges against him have been laid for "political reasons".

"Since the Australian government cannot tolerate Sheikh Haron's activity, is trying to damage his image by these false accusations, and also for putting pressure on him to stop his activity and keep him silent, but God willing Man Haron Monis will not stop his political activity against oppression," he writes on the website.

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Australia police said earlier their "only goal" was to rescue the remaining hostages being held by Monis, after five of them earlier fled the Lindt Cafe.

"Our only goal tonight and for as long as this takes, is to get those people that are currently caught in that building, out of there safely. That remains our number one priority and nothing will change," New South Wales (NSW) Police Commissioner Andrew Scipione said on Monday in a media briefing.

The commissioner also indicated the police think there is only one location of interest at this point, despite media reports that four bombs have been planted in the city.

"We are only at this stage dealing with one location. We are not concerned at this stage about any other," said Mr Scipione, when asked if the Opera House and other major buildings have been cleared of explosive devices.

"We won’t go into the details about who is in there, how many are in there. We are not in a position to do that at the moment," Mr Scipione added.

People who work in Martin Place or nearby have been asked to work from home on Tuesday because of the hostage incident.

Television footage showed three men running out of the cafe in Martin Place on Monday afternoon, followed by another two women.

"Police negotiators have had contact and they continue to have contact (with the gunman)and we will work through this as we do, with our negotiators," NSW Deputy Commissioner Catherine Burn earlier told a press conference.

She said she could not confirm the number of hostages still held in the cafe by the gunman, adding that "it would not be particularly useful to do so". But 7 News Sydney reported that 15 people are still being held.

The deputy police commissioner told reporters she also could not confirm the gunman demands as reported by media outlets.

"We have to deal with him on the level of police negotiation. We cannot engage in speculation."

Australia's Channel Ten News reported that Monis had demanded to speak to Prime Minister Tony Abbott and he said bombs had been planted in the cafe and in the central business district of Sydney.

He also reportedly demanded that a flag belonging to the militant group, Islamic State in Iraq and Syria, be delivered to him.

Earlier on Monday, Mr Scipione told a news conference in Sydney: "We have moved to a footing that would be consistent with a terrorist event.”

The five hostages appeared to have run out of a side door of the cafe which was being watched by heavily armed police, hours after the standoff began.

The hostage crisis led to parts of the city being locked down on Monday, with major buildings including the Sydney Opera House, State Library and government offices evacuated.

The police commissioner said the siege was contained to a single event in Sydney’s central business district and that the city remained open for business.

The cafe is located in Martin Place which is home to the Reserve Bank of Australia, commercial banks and close to the NSW state parliament.

"We're working as hard as we can to determine the exact number (of hostages),'' Mr Scipione said.

Some of the hostages were seen holding a black flag with white Arabic writing, raising fears that the incident is linked to Islamic militants, said local reports. AFP reported that the wordings on the flag appeared to be the shahada, or profession of faith in Islam, and could be translated as: “There is no god but Allah; Mohammed is the Messenger of Allah.”

A terror expert told Australia's 7 News that the flag belongs to that of militant group Jabah Al-Nusra, also known as Al-Nusra Front.

Abbott condemns incident, urges calm

Reading his first statement on the incident on Monday morning, Prime Minister Tony Abbott said: “We don’t know whether this is politically motivated.”

He urged Australians not to allow the news to affect their daily lives. "Australia is a peaceful, open and generous society. Nothing should ever change that, and that's why I would urge all Australians today to go about their business as usual."

In a second statement on Monday afternoon, he said "this is a very disturbing incident. It is profoundly shocking that innocent people should be held hostage by an armed person claiming political motivation. Nevertheless I can say that New South Wales police and other agencies have responded to this incident with great professionalism."

The Australian National Imams Council said it “condemns this criminal act unequivocally”. In a joint statement with the Grand Mufti of Australia, the Council said that “such actions are denounced in part and in whole in Islam”.

Sydney Opera House, other major buildings including US Consulate evacuated

Soon after the hostage crisis broke out, the Sydney Opera House was evacuated after a suspicious package was found. It was not clear if the two incidents were related. Performances scheduled on Monday were cancelled.

The Age newspaper reported that other major buildings were also evacuated and thousands of workers in Sydney sent home early. The buildings included the State Library, Channel Seven television station offices, the New South Wales (NSW) parliamentary executive offices, the NSW Supreme Court's criminal courts and several city legal chambers.

Major banks also closed their branches in the central business district.

The United States evacuated its Sydney Consulate, which is located near the cafe, and issued an emergency warning to US citizens in Sydney, urging them to "maintain a high level of vigilance". A White House official said President Barack Obama had been briefed on the situation.

Airlines said on Monday that flights are landing and taking off normally at Sydney Airport, but a diversion is in place around the city’s central business district where the hostage crisis is taking place.

In a Facebook post later in the afternoon, the Opera House said that all performances for Monday night had been cancelled.

Up to 100 police officers were deployed to the area around the cafe in Martin Place, said local reports.

People in the immediate area around Martin Place were advised to stay indoors and away from open windows.

Patrick Byrne, a producer at Channel Seven whose newsroom is opposite the cafe, said staff at the television station watched the situation unfold.“We raced to the window and saw the shocking and chilling sight of people putting their hands up against the panes of glass at the cafe,” he told the Australian Broadcasting Corporation.

“This was just extraordinary.”

The Telegraph quoted an unnamed Australian delivery man as saying: "I saw the gunman. He was quite tall, probably late 40s, had a long white sleeved T-shirt and a black vest. He was very calm, pacing, looking into the lift well.

"And I could see other customers sitting down at their tables, they were still drinking, and I'm not sure how alert they were to what was going on. But they were locked in, and they were aware that they were locked in."

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